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What does it really take to succeed in business today? In A New Brand World, Scott Bedbury, who helped make Nike and Starbucks two of the most successful brands of recent years, explains this often mysterious process by setting out the principles that helped these companies become leaders in their respective industries. With illuminating anecdotes from his own in-the-trenches experiences and dozens of case studies of other winning—and failed—branding efforts (including Harley-Davidson, Guinness, The Gap, and ...
What does it really take to succeed in business today? In A New Brand World, Scott Bedbury, who helped make Nike and Starbucks two of the most successful brands of recent years, explains this often mysterious process by setting out the principles that helped these companies become leaders in their respective industries. With illuminating anecdotes from his own in-the-trenches experiences and dozens of case studies of other winning—and failed—branding efforts (including Harley-Davidson, Guinness, The Gap, and Disney), Bedbury offers practical, battle-tested advice for keeping any business at the top of its game.
1: all aboard the brandwagon
Principle #1 Relying on brand awareness has become marketing fool's gold.
You've probably noticed in the past couple of years that once-arcane phrases like "brand dilution," "brand synergy," "brand equity," and "brand recognition" have begun tripping lightly off just about every tongue in the business punditocracy. Such glib terms and phrases are typically uttered not only with a straight face but also with a solemn pursing of the lips and no detectable trace of irony.
"In the landmark 1967 film The Graduate," the New York Times business reporter Joel Sharkey recently wrote, "there is the famous scene at the cocktail party where a helpful older man whispers this single word of business advice into the ear of a callow, befuddled young Dustin Hoffman: 'Plastics.' Remake the movie today, and you'd have to change the line to 'branding.'"
These days, the term "branding" is being uttered in the same pious, reverential tones formerly reserved for buzz words like "synergy," "leverage," and "strategic planning." The brand idea is no longer confined just to packaged consumer products. Today the word "brand" has become part of the vernacular within every department of any progressive company. It is on everyone's radar screen, though not everyone really knows what it means. Personally, and speaking as something of a brand fool, all this loose talk makes me nervous. For it was only a few years ago that everyone had given brands up for dead.
Brand Awareness Versus Brand Strength
Step back to the spring of 1993, when Marlboro, one of the world's most recognizable brands (if not the most recognizable) stunned the marketing world when it announced that it would have to aggressively cut its cigarette prices to stay competitive. The move was prompted by an onslaught of lower-cost, less-known competitors. Some of these were essentially generic, without any real brand sensibilities or public recognition in the market, other than that they were cheap. Others were barely brands in their own right. Wall Street analysts hammered Marlboro's parent company Philip Morris's stock, and several business magazines heralded the death of branding the very next week. According to them, it was price, not brand image, that would matter in the future. Building a strong brand was a concept that had run its course.
My friend Watts Wacker, a professional futurist, had it right when he stated at an Association of National Advertisers conference that year, "I believe the nineties officially began with Marlboro's inability to sustain its price. When the number one brand realized that its value proposition (what the brand was really 'worth' in the minds of the customer) was out of sync, that underlines the difference between a pig and a hog."
Asked by one conference participant to define that difference, Wacker gamely replied, "You feed a pig, but you slaughter a hog. Brands can be piggy, but they can't be hogs."
To me, the Marlboro Man had not fallen off his horse because the limitations of branding had finally revealed themselves. What sent him plummeting to earth, spurs pointing skyward, were two things: the product had lost any real differentiation in the marketplace from the equally blurred identities of a growing number of competitors, and its marketing strategy had become entirely predictable. By simply resting on past laurels, which was acceptable in the Old Brand World, the Marlboro brand eventually rejoined the larger pack, if you will, of all the other brands of cigarettes. It began to look like one more player in a very large, mostly unremarkable commodity market. The only distinction between Marlboro and its competition was Marlboro's heavier marketing and higher price, something that must have perplexed more than a few smokers.
To Marlboro's credit, it had established strong emotional connections with millions of core users, thanks to decades of rich imagery of the open West: vibrant vistas of cowboys, cattle, campfires, and coffee. Transcending a product-only relationship and connecting the brand to powerful and often timeless emotion-"emotional branding"-will continue to be important in the New Brand World, but it can never replace meaningful product innovation. Emotional branding merely augments and extends a powerful product or service platform by recognizing that some of the most important product benefits are emotional rather than physical. What is new is the need for greater innovation in both product development and marketing communications. In the future, standing still will be lethal to any brand.
Not unlike Marlboro, Nike also wove its brand into timeless emotions by becoming the category protagonist for competitive sports and fitness. But unlike Marlboro, Nike never stopped reinventing its products and its marketing. It is safe to say that Nike Advertising took a thousand different creative tacks on the same core brand positioning during my eight-year watch, from 1987 to 1994. While Nike Advertising was constantly refreshing the marketing and brand positioning, Nike Design became one of the world's premier product design and development organizations. Speed of change was also important to Nike. Just when Marlboro was beginning to falter, Nike was introducing so many new products and marketing campaigns that it had reduced its average product life cycle from one year to three or four months. Relevance and Resonance
But change for the sake of change can also be marketing fool's gold. The best reason for change is to expand brand relevance and brand resonance, two measures of brand strength that are much more valuable than mere brand awareness can ever be. Perhaps this is the greatest single change in the concept of "brand" in recent years. Where we once looked at brands on a surface level, we now view them in more intimate and multidimensional terms. We plumb their depths, looking for reassurance that they are good, responsible, sensitive, knowing, and hip. Never in the history of business has there been such scrutiny of brand performance.
'So how do brands become more relevant and resonate more deeply with customers? One of the most rewarding strategies for achieving this goal has been mass customization, the process of creating a broader array of "niche" products that emanate from one central brand position like spokes on a wheel. Executed properly, mass customization enables large brands to build and retain relationships with smaller subsets of a mass market while growing the entire brand franchise.
Consider Harley-Davidson. Yet another brand with a timeless emotional position-the open road, personal freedom, and rebellion-Harley-Davidson also understands the value of providing customers myriad ways to customize its core product or embrace its brand. For FY 2000, Harley posted $2.2 billion in revenues from its motorcycles. It also posted $600 million in revenue on parts, accessories, and general merchandise. The latter delivered more than just high profit margins to the company. It also enabled consumers to customize their own Harley-Davidson brand experience.
Another brand historically hell-bent on change has been Intel, with its "self-cannibalization" of Pentium technology in the nineties. Intel was well aware that with every new, faster chip, it was essentially killing its young, but it recognized this violent act as a form of what Intel chairman Andy Grove called "creative destruction." (This term was originally coined by the early-twentieth-century Austrian economist Joseph Schumpeter and was later popularized by both Grove and General Electric's CEO, Jack Welch.)
Marlboro's plight gave the big, traditional, Old Brand World brands much to ponder, especially the Über-brands like U.S. Tobacco, Unilever, Procter & Gamble, General Foods, and Nestlé. For them, "Marlboro Friday," as they called the day the price cuts came down, threatened the foundation of trillions of dollars' worth of merchandise and services derived from their brands-brands that had by then apparently grown too similar, too complacent, and too reliant on outdated and conservative marketing practices. The notion that a brand could survive for years, even decades, without significant change to its product or marketing had to be abandoned. Branding had become a game of fast-break basketball. The fastest and most innovative team would win. Branding, it also became clear, was no longer a straightforward concept.
Fortunately for Nike, it never looked to the postindustrial brand juggernauts for best brand-development practices. In fact, we steered clear of anything that felt like Old Brand World logic. Nike committed a form of "creative destruction" comparable to Intel's by creating literally thousands of products and hundreds of print ads, billboards, and television commercials every year. It aggressively began to mass-customize with new "collections" of products that amounted to sub-brands within categories like basketball and tennis. Each sub-brand and collection beneath the Nike brand umbrella was geared to a particular customer segment or distribution channel. The overall effect of Nike's brand segmentation was to burnish the brand in the mind of the consumer in more creative, more relevant and dynamic ways. Like Intel, the Nike brand became as much about change as about continuity. Both brands kept consumers happy and on their toes, and grew into global powerhouse brands by constantly refreshing and reinventing themselves-remaining forever the same, yet forever new.
The Value of Brand for the Commodity
Nike and Intel had succeeded brilliantly in precisely the area where Marlboro had so dismally failed: the fertile mind of the consumer. Marlboro had been forced to cut prices to match Brand X inferiors and no-name interlopers because cigarettes were increasingly perceived by consumers as commodity products-goods that are essentially "fungible," or mutually interchangeable and undifferentiated, like wheat, pork bellies, or sugar.
This dreary perception of what marketing people call, with justifiable dread, "product parity" erased the value created by literally billions of dollars expended on marketing, promotion, and advertising over the years. Marlboro had spent billions building up the global image of the Marlboro Man as the epitome of rugged American individualism and free-wheeling masculinity, yet this great American icon was being increasingly regarded as representing "just another cigarette." At the same time, Nike and Intel accomplished precisely the reverse. They took what for decades had been considered commodity products, athletic shoes and computer chips, and transformed them into something not merely different, but better.
Almost every brand in existence today can be reduced to the status of a commodity if it fails to effectively evolve both its products and its marketing communications. You can't do just one or the other. The most innovative product line will grow stale in the minds of potential customers if the marketing has become static, undifferentiated, or-even worse-irritating for lack of change. Even the best marketing campaign will be run into the ground when it becomes so repetitive that it wears out its welcome. Stay with a marketing campaign too long and it will send your brand into reverse as consumers lunge for the remote control, change radio stations, or flip past your print ads the nanosecond they recognize that it's just you, again. On the Web it's no different. Consumers will curse your Web banner, too, at some point. Even "permission marketing," a method of marketing where customers "opt in" to be contacted by companies (usually on the Web) for new products and services or to participate in promotions, will wear out its welcome for many unless it is respectful and kept vibrant. Unsolicited e-mails and "notifications" are only marginally more acceptable than unsolicited telemarketing to your home phone during dinner.
The issue of branding has become topical in nearly every business, and in recent years it has become even more critical to industries where competition is particularly fierce and where technology has become a disruptive force. We have witnessed the effects of information technology on stock trading, travel, and even shopping (not necessarily on buying, though that will evolve). But this pales by comparison to the technological changes in the telephone, cable, and wireless industries. An exponential expansion of capacity (thanks to fiber-optic, cable, and wireless technologies) has dropped prices as well as barriers for entry to potential competitors. At the turn of the century, it became a price-driven war for survival. Profits have crumbled and many question what the future holds for some of the biggest and once-strong brands in the world. In the March 19, 2001, issue of Forbes magazine, the publisher, Rich Karlgaard, put his thumb on the plight of a number of large companies with enormous brand awareness but downward-spiraling profits in a column that illuminated many of the shortcomings of traditional brand thinking.
"The 20th-century idea of a brand is inadequate protection these days-a castle wall in the age of cannons," Karlgaard writes. "Needed is fresh thinking on a brand's new responsibilities." Why, he wonders, are the brands that enjoy the greatest awareness facing such a hard time in the marketplace? The answer is simple: awareness is just about all that some of them have to show for themselves anymore.
This complacency is not limited to the tired old brands that have been sitting on their "old economy" butts. Also at the turn of the century, quite a few newer brands sought to create brand awareness and ended up with only that. The failed Internet brand Pets.com built huge brand awareness with its admittedly cloying sock-puppet mascot, and eToys also created enormous name recognition for itself en route to bankruptcy court. Massive levels of brand awareness will not correct a flawed business model. Excessive marketing spending will only accelerate the demise of any poorly conceived company.
These companies are mere blips on the screen when compared to a massive, established juggernaut like AT&T, but even AT&T has been having its own brand troubles lately. By the turn of the century the phone industry had become a textbook case of what happens when a product or service becomes invisible at best, frustrating at worst, and so omnipresent that it generates excitement in no one. And the overabundance of capacity created a marketing war that none of us could possibly have missed.
At one point AT&T was spending more than a billion dollars per year on marketing, mainly to mitigate the negative effects on its bottom line from disloyal-customer "churn," an outgrowth of the widely available and heavily discounted offerings by competitors. Just as computer chips and sneakers once were no-frills items, phone service has become a commodity. Rather than reinvent the commodity, however, most phone companies opted to do what they had done ever since deregulation first hit in the mid-eighties. They plowed more and more money into traditional marketing schemes, nearly all of them complicated and sometimes deceptive promotions and dial-around services with myriad 800 numbers that connect callers to discounted long-distance providers.
I strongly suspect that most of these companies assumed that outlandish promotional budgets would help strengthen their brands, but in reality such excessive expenditures may have had a reverse effect. Nearly all of that high-cost telecom advertising delivered one brand-fatal message: the only factor that matters when it comes to phone service is price. Not service, not new technology, not friendly customer support, customer relations, or the quality of the people behind the brand. Any market in which the only critical factor is price is by definition a commodity market. Take wheat, pork bellies, gold, and silver-in every one of these markets, the only factor is price per pound on a given day. A rare exception to this rule is Morton Salt, which built a viable brand out of a commodity and made it synonymous with quality and value. What's the principal difference today between Sprint, MCI, and AT&T, or a whole host of smaller, rival phone services? Price, of course. Perceptions of product parity are the death of the brand in any business. It takes great creativity for any brand, once immersed, to pull itself out of the murky soup of product parity. The future for this industry may rest with companies like Tellme Networks, a voice-recognition communications company located in Mountain View, California, that may render the buttons on the phone unnecessary. "Dial Tone 2.0," as we liked to refer to it while I was helping Tellme map out its own brand architecture in 2000, will marry the information power of the Web with the simplicity and omnipresence of the phone. Interestingly, AT&T was one of the early investors in Tellme.
Branding a Commodity: The Right Way
Part of the appeal for me in joining Starbucks in 1995 was the prospect of helping create another powerful global brand from within a commodity business, as we had accomplished at Nike with sneakers. But this time around, we would not be able to rely on major advertising or any of the beneficial awareness that marketing might bring. Starbucks was investing more than $100 million each year in opening new locations and also had one of the best-and most expensive-employee benefits programs ever offered anywhere. As a result, it had very little left over for mass marketing.
When I left Nike, I left behind a $200 million marketing communications war chest, up significantly from the $17 million budget I had started with seven years earlier. Interestingly, the percentage of sales that Nike committed to advertising remained the same over that period. As top-line revenues grew, so did our marketing. Starbucks CEO Howard Schultz had been able to scrape together a $5 million marketing budget for my first year there. We invested the money in redesigning the stores and every aspect of product packaging, in new product development, and in grassroots marketing, particularly in new markets. During the time I was there the budget never increased much, and Starbucks never bought network broadcast or national print advertising, though we made several stabs at seeing what it would look like, creatively, if we ever needed it. Starbucks was blessed by the fact that the rest of the coffee world was still fast asleep at the switch, pumping out undifferentiated products for the grocery channel, manufactured to the lowest possible price. For decades, industry innovation had been leveraged to get costs down rather than quality up. And in the fifty-year race to see who could make the cheapest three-pound can of coffee and stack it high and deep on the end of the grocery aisle, the coffee brands spent billions of dollars on marketing that was at best unremarkable.
As it turned out, the industry giants essentially sat on their hands while Starbucks reinvented a nine-hundred-year-old product they had dominated for generations. Was Starbucks any more convenient than a home-made cup of coffee? Not really. Most customers have to drive or walk to their nearest Starbucks, and wait another six or seven minutes to get their morning drink. Was it cheaper? Hardly. On a per cup basis, a double-tall nonfat latte costs ten times more than a cup of sour, scalded Joe made from a six-month-old can of barely roasted, one-grind-fits-all low-elevation robusta bean shavings. Rather than compromise on product quality in order to have money to spend on expensive media campaigns, Starbucks served up a steady stream of hand-crafted, customized products in a welcoming, well-lit, clean, and comforting environment. The Starbucks experience proved relevant from Times Square in New York to King's Road in London to the Ginza in Tokyo. It also works well in five thousand other locations around the world today.
But Starbucks didn't limit the process of brand development to coffee alone. In 1995 it began to sell its own music compilations on CDs, as well as its own books, pastries, and other merchandise. But Starbucks didn't really make the coffee kings nervous until it successfully entered their own turf, the grocery store, with bottled Frappuccino, Starbucks coffee ice creams, and whole-bean coffees, all in the span of a single year. They thought we were out to get them, but we were just following our Golden Rule: brewing unto others as we would have them brew unto us. We believed that no one should have to drink bad coffee at work, eat coffee ice cream that had no real coffee in it, or brew poor-quality coffee at home, even if the Starbucks choices cost a little more. Branding a Commodity: The Wrong Way
The confusion between brand awareness and brand strength reached its zenith six years after the Marlboro Man fell off his high horse, as the technology sector-especially Web-based e-commerce companies, software companies, and e-business consulting companies-took center stage in the battle for brand differentiation. For a time, the new brand battles were fought between Intel and AMD, Compaq, IBM, and Apple; between Amazon.com and Yahoo!; between eBay and eToys.
Nothing was more important for many of the freshly minted dot coms, in those halcyon days, than immediately establishing themselves as the brand in their space. To do so, they figured, would require loads of advertising. In the span of a few short years, billions of marketing dollars evaporated at the hands of young, restless, well-funded, and inexperienced entrepreneurs in the pursuit of "brand building." Despite the revolutionary nature of the business, most followed the misguided example of their Old Economy predecessors and equated brand awareness with brand strength.
In the wake of the dot-com bust, many companies overreacted and fled to the opposite extreme, reflexively deeming all forms of mass media a complete waste of time. They turned their attention instead to Web-based marketing, usually in the form of issuing blizzards of unsolicited e-mails and banner ads wherever they could get them. I encountered the fallout of this approach firsthand at a board meeting for one of Silicon Valley's most promising start-ups. One board member who had funded a number of by then failing companies remarked, "I can't think of too many of my portfolio companies that are happy that they spent a ton of money on advertising lately."
Another board member added, "Television doesn't work. Never has and never will." This "insight" amazed me. Apparently the speaker's experience had been formed at Microsoft, a company that could not buy good advertising no matter how hard it tried. And it spent a lot of money trying. Microsoft had even hired Nike's agency, Wieden & Kennedy, in 1994 for the launch of Windows 95 and to help it "with its brand work." Save for the "Start Me Up" commercial, the relationship was a complete disaster and was not long-lived. But I don't believe for a moment that the problem was the fault of the agency, for Microsoft is a notoriously difficult client and Wieden is a notoriously gifted agency. Shortly after this board meeting I spoke with one former Microsoft marketing executive turned venture capitalist who also thought that television was a waste for any company, click or mortar. I asked him how he felt about the creative process with Wieden & Kennedy.
"Wieden & Kennedy never got the heart of Microsoft," he complained.
"That's funny," I replied. "I never knew Microsoft had a heart."
To their credit, the Portland, Oregon-based creative powerhouse Wieden & Kennedy-which has kept a relationship with Nike since the agency opened its door in 1981-had sought in vain to find something deeper within Microsoft that would resonate with the world, not unlike what they had accomplished for Nike. They tried to define something in the brand that was more meaningful to people than mere software, but they came up empty-handed. Even the best advertising cannot create something that is not there. If a company lacks soul or heart, if it doesn't understand the concept of "brand," or if it is disconnected from the world around it, there is little chance that its marketing will resonate deeply with anyone. It's a lot like putting lipstick on a pig.
Shortly after the 2000 Super Bowl, I was asked by a writer from USA Today to comment on the televised ad presence and creative performance of the dot coms. The writer informed me, half kidding, that he was starting to think that all the creative disasters he had been treated to that past Sunday could be blamed on Nike.
"You made it all look so easy," the reporter observed. "They think that all they have to do to create a great brand is to hire a hot ad agency, tell them they want 'Nike advertising,' and 'spend lots of money.'"
"They overlooked three things," I replied. "We had a compelling product that everyone understood. We had a business model that actually worked. And we had common sense when reviewing creative ideas."
I can't think of much better advice for any brand in any industry. Start with a great product or service that people desire and that you can sell profitably. The best brands never start out with the intent of building a great brand. They focus on building a great-and profitable-product or service and an organization that can sustain it. Once that has been accomplished, you can slam your foot on the marketing accelerator and let the whole world know about it. But get ready to meet the demand created by that marketing or you will destroy your brand before it ever gets off the ground. And also know that your advertising must create a proposition that your product or service delivers on, time and time again.
Reprinted from A New Brand World by Scott Bedbury by permission of Penguin Books, a member of Penguin Group (USA) inc.. Copyright © 2003, Scott Bedbury. All rights reserved. This excerpt, or any parts thereof, may not be reproduced in any form without permission.
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Acknowledgments Introduction: Confessions of a Brand Fool
1. All Aboard the Brandwagon
2. Cracking Your Brand's Genetic Code
3. Building Brandwidth
4. Show Some Emotion
5. Brand Environmentalism
6. Brand Leadership
7. Branding and the Corporate Goliath
8. Brand Future Index
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